Bill Text: MS HB170 | 2025 | Regular Session | Introduced
Bill Title: UCC; revise certain provisions relating to investment securities.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2025-01-10 - Referred To Banking and Financial Services [HB170 Detail]
Download: Mississippi-2025-HB170-Introduced.html
MISSISSIPPI LEGISLATURE
2025 Regular Session
To: Banking and Financial Services
By: Representative Newman
House Bill 170
AN ACT TO AMEND SECTIONS 75-8-110, 75-8-503, 75-8-511 AND 75-9-305, MISSISSIPPI CODE OF 1972, WHICH RELATE TO INVESTMENT SECURITIES, TO REVISE CERTAIN PROVISIONS REGARDING SECURITIES INTERMEDIARY'S AND ENTITLEMENT HOLDER'S JURISDICTION; TO BRING FORWARD SECTIONS 75-8-501, 75-8-502, 75-8-504, 75-8-505, 75-8-506, 75-8-507, 75-8-508, 75-8-509, 75-8-510, 75-8-511, 75-1-301, 75-9-103, 75-9-304 AND 75-9-306, MISSISSIPPI CODE OF 1972, WHICH RELATE TO SECURITY ENTITLEMENTS, FOR PURPOSES OF POSSIBLE AMENDMENT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Section 75-8-110, Mississippi Code of 1972, is amended as follows:
75-8-110. (a) The local law of the issuer's jurisdiction, as specified in subsection (d), governs:
(1) The validity of a security;
(2) The rights and duties of the issuer with respect to registration of transfer;
(3) The effectiveness of registration of transfer by the issuer;
(4) Whether the issuer owes any duties to an adverse claimant to a security; and
(5) Whether an adverse claim can be asserted against a person to whom transfer of a certificated or uncertificated security is registered or a person who obtains control of an uncertificated security.
(b) The local law of the * * * entitlement
holder's jurisdiction * * *, as specified in subsection (e), governs * * *.
* * *
(c) The local law of the jurisdiction in which a security certificate is located at the time of delivery governs whether an adverse claim can be asserted against a person to whom the security certificate is delivered.
(d) "Issuer's jurisdiction" means the jurisdiction under which the issuer of the security is organized or, if permitted by the law of that jurisdiction, the law of another jurisdiction specified by the issuer. An issuer organized under the law of this state may specify the law of another jurisdiction as the law governing the matters specified in subsection (a)(2) through (5).
* * *
SECTION 2. Section 75-8-503, Mississippi Code of 1972, is amended as follows:
75-8-503. (a) To the extent necessary for a
securities intermediary to satisfy all security entitlements with respect to a
particular financial asset, all interests in that financial asset held by the
securities intermediary are held by the securities intermediary for the
entitlement holders, are not property of the securities intermediary, and are
not subject to claims of creditors of the securities intermediary * * *.
(b) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) is a pro rata property interest in all interests in that financial asset held by the securities intermediary, without regard to the time the entitlement holder acquired the security entitlement or the time the securities intermediary acquired the interest in that financial asset.
(c) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) may be enforced against the securities intermediary only by exercise of the entitlement holder’s rights under Sections 75-8-505 through 75-8-508.
(d) An entitlement holder's property interest with respect to a particular financial asset under subsection (a) may be enforced against a purchaser of the financial asset or interest therein only if:
(1) Insolvency proceedings have been initiated by or against the securities intermediary;
(2) The securities intermediary does not have sufficient interests in the financial asset to satisfy the security entitlements of all of its entitlement holders to that financial asset;
(3) The securities intermediary violated its obligations under Section 75-8-504 by transferring the financial asset or interest therein to the purchaser; and
(4) The purchaser is not protected under subsection (e).
The trustee or other liquidator, acting on behalf of all entitlement holders having security entitlements with respect to a particular financial asset, may recover the financial asset, or interest therein, from the purchaser. If the trustee or other liquidator elects not to pursue that right, an entitlement holder whose security entitlement remains unsatisfied has the right to recover its interest in the financial asset from the purchaser.
(e) An action based on the entitlement holder's property interest with respect to a particular financial asset under subsection (a), whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against any purchaser of a financial asset or interest therein who gives value, obtains control, and does not act in collusion with the securities intermediary in violating the securities intermediary's obligations under Section 75-8-504.
SECTION 3. Section 75-8-511, Mississippi Code of 1972, is amended as follows:
75-8-511. (a) * * * If a securities intermediary
does not have sufficient interests in a particular financial asset to satisfy
both its obligations to entitlement holders who have security entitlements to
that financial asset and its obligation to a creditor of the securities
intermediary who has a security interest in that financial asset, the claims of
entitlement holders, other than the creditor, have priority over the claim of
the creditor.
* * *
SECTION 4. Section 75-9-305, Mississippi Code of 1972, is amended as follows:
75-9-305. (a) Except as otherwise provided in subsection (c), the following rules apply:
(1) While a security certificate is located in a jurisdiction, the local law of that jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in the certificated security represented thereby.
(2) The local law of the issuer's jurisdiction as specified in Section 75-8-110(d) governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in an uncertificated security.
* * *
( * * *3) The local law of the commodity
intermediary's jurisdiction governs perfection, the effect of perfection or
nonperfection, and the priority of a security interest in a commodity contract
or commodity account.
(b) The following rules determine a commodity intermediary's jurisdiction for purposes of this part:
(1) If an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that a particular jurisdiction is the commodity intermediary's jurisdiction for purposes of this part, this article, or the Uniform Commercial Code, that jurisdiction is the commodity intermediary's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the commodity intermediary and commodity customer governing the commodity account expressly provides that the commodity account is maintained at an office in a particular jurisdiction, that jurisdiction is the commodity intermediary's jurisdiction.
(4) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the commodity customer's account is located.
(5) If none of the preceding paragraphs applies, the commodity intermediary's jurisdiction is the jurisdiction in which the chief executive office of the commodity intermediary is located.
(c) The local law of the jurisdiction in which the debtor is located governs:
(1) Perfection of a security interest in investment property by filing;
(2) Automatic perfection of a security interest in investment property created by a broker or securities intermediary; and
(3) Automatic perfection of a security interest in a commodity contract or commodity account created by a commodity intermediary.
SECTION 5. Section 75-8-501, Mississippi Code of 1972, is brought forward as follows:
75-8-501. (a) "Securities account" means an account to which a financial asset is or may be credited in accordance with an agreement under which the person maintaining the account undertakes to treat the person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.
(b) Except as otherwise provided in subsections (d) and (e), a person acquires a security entitlement if a securities intermediary:
(1) Indicates by book entry that a financial asset has been credited to the person's securities account;
(2) Receives a financial asset from the person or acquires a financial asset for the person and, in either case, accepts it for credit to the person's securities account; or
(3) Becomes obligated under other law, regulation, or rule to credit a financial asset to the person’s securities account.
(c) If a condition of subsection (b) has been met, a person has a security entitlement even though the securities intermediary does not itself hold the financial asset.
(d) If a securities intermediary holds a financial asset for another person, and the financial asset is registered in the name of, payable to the order of, or specially indorsed to the other person, and has not been indorsed to the securities intermediary or in blank, the other person is treated as holding the financial asset directly rather than as having a security entitlement with respect to the financial asset.
(e) Issuance of a security is not establishment of a security entitlement.
SECTION 6. Section 75-8-502, Mississippi Code of 1972, is brought forward as follows:
75-8-502. An action based on an adverse claim to a financial asset, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who acquires a security entitlement under Section 75-8-501 for value and without notice of the adverse claim.
SECTION 7. Section 75-8-504, Mississippi Code of 1972, is brought forward as follows:
75-8-504. (a) A securities intermediary shall promptly obtain and thereafter maintain a financial asset in a quantity corresponding to the aggregate of all security entitlements it has established in favor of its entitlement holders with respect to that financial asset. The securities intermediary may maintain those financial assets directly or through one or more other securities intermediaries.
(b) Except to the extent otherwise agreed by its entitlement holder, a securities intermediary may not grant any security interests in a financial asset it is obligated to maintain pursuant to subsection (a).
(c) A securities intermediary satisfies the duty in subsection (a) if:
(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to obtain and maintain the financial asset.
(d) This section does not apply to a clearing corporation that is itself the obligor of an option or similar obligation to which its entitlement holders have security entitlements.
SECTION 8. Section 75-8-505, Mississippi Code of 1972, is brought forward as follows:
75-8-505. (a) A securities intermediary shall take action to obtain a payment or distribution made by the issuer of a financial asset. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to attempt to obtain the payment or distribution.
(b) A securities intermediary is obligated to its entitlement holder for a payment or distribution made by the issuer of a financial asset if the payment or distribution is received by the securities intermediary.
SECTION 9. Section 75-8-506, Mississippi Code of 1972, is brought forward as follows:
75-8-506. A securities intermediary shall exercise rights with respect to a financial asset if directed to do so by an entitlement holder. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary either places the entitlement holder in a position to exercise the rights directly or exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.
SECTION 10. Section 75-8-507, Mississippi Code of 1972, is brought forward as follows:
75-8-507. (a) A securities intermediary shall comply with an entitlement order if the entitlement order is originated by the appropriate person, the securities intermediary has had reasonable opportunity to assure itself that the entitlement order is genuine and authorized, and the securities intermediary has had reasonable opportunity to comply with the entitlement order. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts with respect to the duty as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to comply with the entitlement order.
(b) If a securities intermediary transfers a financial asset pursuant to an ineffective entitlement order, the securities intermediary shall reestablish a security entitlement in favor of the person entitled to it, and pay or credit any payments or distributions that the person did not receive as a result of the wrongful transfer. If the securities intermediary does not reestablish a security entitlement, the securities intermediary is liable to the entitlement holder for damages.
SECTION 11. Section 75-8-508, Mississippi Code of 1972, is brought forward as follows:
75-8-508. A securities intermediary shall act at the direction of an entitlement holder to change a security entitlement into another available form of holding for which the entitlement holder is eligible, or to cause the financial asset to be transferred to a securities account of the entitlement holder with another securities intermediary. A securities intermediary satisfies the duty if:
(1) The securities intermediary acts as agreed upon by the entitlement holder and the securities intermediary; or
(2) In the absence of agreement, the securities intermediary exercises due care in accordance with reasonable commercial standards to follow the direction of the entitlement holder.
SECTION 12. Section 75-8-509, Mississippi Code of 1972, is brought forward as follows:
75-8-509. (a) If the substance of a duty imposed upon a securities intermediary by Sections 75-8-504 through 75-8-508 is the subject of other statute, regulation, or rule, compliance with that statute, regulation, or rule satisfies the duty.
(b) To the extent that specific standards for the performance of the duties of a securities intermediary or the exercise of the rights of an entitlement holder are not specified by other statute, regulation, or rule or by agreement between the securities intermediary and entitlement holder, the securities intermediary shall perform its duties and the entitlement holder shall exercise its rights in a commercially reasonable manner.
(c) The obligation of a securities intermediary to perform the duties imposed by Sections 75-8-504 through 75-8-508 is subject to:
(1) Rights of the securities intermediary arising out of a security interest under a security agreement with the entitlement holder or otherwise; and
(2) Rights of the securities intermediary under other law, regulation, rule, or agreement to withhold performance of its duties as a result of unfulfilled obligations of the entitlement holder to the securities intermediary.
(d) Sections 75-8-504 through 75-8-508 do not require a securities intermediary to take any action that is prohibited by other statute, regulation, or rule.
SECTION 13. Section 75-8-510, Mississippi Code of 1972, is brought forward as follows:
75-8-510. (a) In a case not covered by the priority rules in Article 9 or the rules stated in subsection (c), an action based on an adverse claim to a financial asset or security entitlement, whether framed in conversion, replevin, constructive trust, equitable lien, or other theory, may not be asserted against a person who purchases a security entitlement, or an interest therein, from an entitlement holder if the purchaser gives value, does not have notice of the adverse claim, and obtains control.
(b) If an adverse claim could not have been asserted against an entitlement holder under Section 75-8-502, the adverse claim cannot be asserted against a person who purchases a security entitlement, or an interest therein, from the entitlement holder.
(c) In a case not covered by the priority rules in Chapter 9, a purchaser for value of a security entitlement, or an interest therein, who obtains control has priority over a purchaser of a security entitlement, or an interest therein, who does not obtain control. Except as otherwise provided in subsection (d), purchasers who have control rank according to priority in time of:
(1) The purchaser's becoming the person for whom the securities account, in which the security entitlement is carried, is maintained, if the purchaser obtained control under Section 75-8-106(d)(1);
(2) The securities intermediary's agreement to comply with the purchaser's entitlement orders with respect to security entitlements carried or to be carried in the securities account in which the security entitlement is carried, if the purchaser obtained control under Section 75-8-106(d)(2); or
(3) If the purchaser obtained control through another person under Section 75-8-106(d)(3), the time on which priority would be based under this subsection if the other person were the secured party.
(d) A securities intermediary as purchaser has priority over a conflicting purchaser who has control unless otherwise agreed by the securities intermediary.
SECTION 14. Section 75-8-511, Mississippi Code of 1972, is brought forward as follows:
75-8-511. (a) Except as otherwise provided in subsections (b) and (c), if a securities intermediary does not have sufficient interests in a particular financial asset to satisfy both its obligations to entitlement holders who have security entitlements to that financial asset and its obligation to a creditor of the securities intermediary who has a security interest in that financial asset, the claims of entitlement holders, other than the creditor, have priority over the claim of the creditor.
(b) A claim of a creditor of a securities intermediary who has a security interest in a financial asset held by a securities intermediary has priority over claims of the securities intermediary's entitlement holders who have security entitlements with respect to that financial asset if the creditor has control over the financial asset.
(c) If a clearing corporation does not have sufficient financial assets to satisfy both its obligations to entitlement holders who have security entitlements with respect to a financial asset and its obligation to a creditor of the clearing corporation who has a security interest in that financial asset, the claim of the creditor has priority over the claims of entitlement holders.
SECTION 15. Section 75-1-301, Mississippi Code of 1972, is brought forward as follows:
75-1-301. Territorial application of the code; parties' power to choose applicable law. (a) Except as provided hereafter in this section, when a transaction bears a reasonable relation to this state and also to another state or nation the parties may agree that the law either of this state or of such other state or nation shall govern their rights and duties. Failing such agreement, the Uniform Commercial Code applies to transactions bearing an appropriate relation to this state. However, the law of the State of Mississippi shall always govern the rights and duties of the parties in regard to disclaimers of implied warranties of merchantability or fitness, limitations of remedies for breaches of implied warranties of merchantability or fitness, or the necessity for privity of contract to maintain a civil action for breach of implied warranties of merchantability or fitness notwithstanding any agreement by the parties that the laws of some other state or nation shall govern the rights and duties of the parties.
(b) Where one (1) of the following provisions of the Uniform Commercial Code specifies the applicable law, that provision governs and a contrary agreement is effective only to the extent permitted by the law (including the conflict of laws rules) so specified:
Rights of creditors against sold goods (Section 75-2-402).
Applicability of the Article on Leases (Sections 75-2A-105 and 75-2A-106).
Applicability of the Article on Bank Deposits and Collections (Section 75-4-102).
Governing law in the Article on Funds Transfers (Section 75-4A-507).
Letters of credit (Section 75-5-116).
Applicability of the Article on Investment Securities (Section 75-8-110).
Law governing perfection, the effect of perfection or nonperfection, and the priority of security interests and agricultural liens (Sections 75-9-301 through 75-9-307).
SECTION 16. Section 75-9-103, Mississippi Code of 1972, is brought forward as follows:
75-9-103. (a) In this section:
(1) "Purchase-money collateral" means goods or software that secures a purchase-money obligation incurred with respect to that collateral; and
(2) "Purchase-money obligation" means an obligation of an obligor incurred as all or part of the price of the collateral or for value given to enable the debtor to acquire rights in or the use of the collateral if the value is in fact so used.
(b) A security interest in goods is a purchase-money security interest:
(1) To the extent that the goods are purchase-money collateral with respect to that security interest;
(2) If the security interest is in inventory that is or was purchase-money collateral, also to the extent that the security interest secures a purchase-money obligation incurred with respect to other inventory in which the secured party holds or held a purchase-money security interest; and
(3) Also to the extent that the security interest secures a purchase-money obligation incurred with respect to software in which the secured party holds or held a purchase-money security interest.
(c) A security interest in software is a purchase-money security interest to the extent that the security interest also secures a purchase-money obligation incurred with respect to goods in which the secured party holds or held a purchase-money security interest if:
(1) The debtor acquired its interest in the software in an integrated transaction in which it acquired an interest in the goods; and
(2) The debtor acquired its interest in the software for the principal purpose of using the software in the goods.
(d) The security interest of a consignor in goods that are the subject of a consignment is a purchase-money security interest in inventory.
(e) In a transaction other than a consumer-goods transaction, if the extent to which a security interest is a purchase-money security interest depends on the application of a payment to a particular obligation, the payment must be applied:
(1) In accordance with any reasonable method of application to which the parties agree;
(2) In the absence of the parties' agreement to a reasonable method, in accordance with any intention of the obligor manifested at or before the time of payment; or
(3) In the absence of an agreement to a reasonable method and a timely manifestation of the obligor's intention, in the following order:
(A) To obligations that are not secured; and
(B) If more than one (1) obligation is secured, to obligations secured by purchase-money security interests in the order in which those obligations were incurred.
(f) In a transaction other than a consumer-goods transaction, a purchase-money security interest does not lose its status as such, even if:
(1) The purchase-money collateral also secures an obligation that is not a purchase-money obligation;
(2) Collateral that is not purchase-money collateral also secures the purchase-money obligation; or
(3) The purchase-money obligation has been renewed, refinanced, consolidated, or restructured.
(g) In a transaction other than a consumer-goods transaction, a secured party claiming a purchase-money security interest has the burden of establishing the extent to which the security interest is a purchase-money security interest.
(h) The limitation of the rules in subsections (e), (f), and (g) to transactions other than consumer-goods transactions is intended to leave to the court the determination of the proper rules in consumer-goods transactions. The court may not infer from that limitation the nature of the proper rule in consumer-goods transactions and may continue to apply established approaches.
SECTION 17. Section 75-9-304, Mississippi Code of 1972, is brought forward as follows:
75-9-304. (a) The local law of a bank's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a deposit account maintained with that bank.
(b) The following rules determine a bank's jurisdiction for purposes of this part:
(1) If an agreement between the bank and its customer governing the deposit account expressly provides that a particular jurisdiction is the bank's jurisdiction for purposes of this part, this article, or the Uniform Commercial Code, that jurisdiction is the bank's jurisdiction.
(2) If paragraph (1) does not apply and an agreement between the bank and its customer governing the deposit account expressly provides that the agreement is governed by the law of a particular jurisdiction, that jurisdiction is the bank's jurisdiction.
(3) If neither paragraph (1) nor paragraph (2) applies and an agreement between the bank and its customer governing the deposit account expressly provides that the deposit account is maintained at an office in a particular jurisdiction, that jurisdiction is the bank's jurisdiction.
(4) If none of the preceding paragraphs applies, the bank's jurisdiction is the jurisdiction in which the office identified in an account statement as the office serving the customer's account is located.
(5) If none of the preceding paragraphs applies, the bank's jurisdiction is the jurisdiction in which the chief executive office of the bank is located.
SECTION 18. Section 75-9-306, Mississippi Code of 1972, is brought forward as follows:
75-9-306. (a) Subject to subsection (c), the local law of the issuer's jurisdiction or a nominated person's jurisdiction governs perfection, the effect of perfection or nonperfection, and the priority of a security interest in a letter-of-credit right if the issuer's jurisdiction or nominated person's jurisdiction is a state.
(b) For purposes of this part, an issuer's jurisdiction or nominated person's jurisdiction is the jurisdiction whose law governs the liability of the issuer or nominated person with respect to the letter-of-credit right as provided in Section 75-5-116.
(c) This section does not apply to a security interest that is perfected only under Section 75-9-308(d).
SECTION 19. This act shall take effect and be in force from and after July 1, 2025.
